Alibaba Group’s business has returned to normal as first-quarter results bested Wall Street’s estimates.
In a Nutshell: The Chinese conglomerate said its core commerce business has “fully recovered to pre-Covid-19 levels across the board.”
“Alibaba delivered excellent results this past quarter. We were well positioned to capture growth from the ongoing digital transformation, which has been accelerated by the pandemic, in both consumption and enterprise operations,” Daniel Zhang, chairman and CEO, said.
“Although the global community continues to struggle with uncertainties surrounding the pandemic, we have seen [a] recovery,” Zhang said during a conference call to the investor community, noting that “Covid-19 has accelerated the transformation of consumer behavior and enterprise transformation.”
And while Zhang said the coronavirus crisis has altered the macro-economic environment and everyday life, that disruption has also provided opportunities for digital growth. In addition, the lack of tourism has also helped pull even more business online.
Looking ahead, the company will continue chasing new users en route to a mid-year goal of serving more than 1 billion Chinese consumers. Alibaba also plans to expand its category offerings and enhance the shopping experience through new formats such as livestreaming, Zhang told investors.
Zhang also addressed the state of tensions between the U.S. and China, noting that “Alibaba’s primary focus in the U.S. is to help American brands sell in China, as well as in other key markets around the world.” While the company is monitoring the situation and any potential impact that would require compliance with new regulations, he believes “global trade will continue and Alibaba’s active pursuit of our mission to make shopping easier benefits both the U.S. and China.”
Net Sales: Revenue for the period ended June 30 was 153.8 billion ($21.8 billion), bringing total revenue growth to 34 percent year-over-year.
Core commerce revenue was 133.3 billion renminbi ($18.9 billion), or a gain of 34 percent year-over-year. Alibaba said it saw “continued rapid growth and increased penetration is less developed areas.” China’s commerce retail business was 101.3 billion ($14.3 billion), representing an increase of 34 percent year-over-year.
Taobao deals, which enable merchants and manufacturers to sell directly to value-conscious consumers, grew to 40 million monthly average users in the quarter, Alibaba said. Taobao Live gross merchandise value grew more than 100 percent year-over-year, while livestreaming sessions hosted by merchants accounted for about 60 percent of the platforms’s GMV. Key opinion leaders, how China refers to influencers, continue to generate “robust GMV growth.” Zhang described livestreaming as event marketing, and said merchants leverage the format to promote sales to introduce shoppers to its brands. He said the business should be thought of not as a separate distinct venture, but more as a complementary service to Alibaba’s overall customer acquisitions solutions package and .
The company said its annual active customers on its China retail marketplaces grew 16 million to 742 million since the March 31 end of the last fiscal year. It also said it continues to see the addition of new users and consumers from less developed areas due to the firm’s broadening of product offerings to meet diverse demands. Alibaba attracted 28 million mobile users in the quarter, and now maintains 874 million mobile monthly average users for the three-month frame. Local consumer services, such as food delivery, garnered 7.1 billion renminbi ($1.0 billion). Alibaba said it saw extended growth momentum in its cloud computing business, which rose 59 percent year-over-year to 12.3 billion renminbi ($1.7 billion).
Tmall’s GMV for online physical goods, excluding unpaid orders, grew 27 percent year-over-year in the quarter, with all major categories growing at similar or faster rates compared to the December quarter before the start of the Covid-19 pandemic. “This solid growth was primarily driven by higher purchase frequency and increased new consumer acquisitions, reflecting the success of our consumer segmentation and category expansion strategies,” Alibaba said. Fast-moving consumer goods, home furnishings and consumer electronics were the best-performing categories during the quarter.
At Tmall Global, the platform that helps overseas brands and merchants reach Chinese consumers directly, GMV, excluding unpaid orders, grew over 40 percent year-over-year. The growth was fueled by strong consumer demand for high-quality, branded products from overseas, as well as increased online purchases.
Earnings: The company said net income for the quarter was 47.6 billion renminbi ($6.7 billion), or 17.36 renminbi a share ($2.46). Much of the gain was due to the increase in share prices of the firm’s equity investments in publicly listed companies. On an adjusted basis, net income was 39.5 billion renminbi ($5.6 billion), or 14.82 renminbi a share ($2.10).
Wall Street was expecting adjusted earnings per share of $1.99 on revenue of $21.34 billion.
“Our domestic core commerce business has fully recovered to pre-Covid-19 levels across the board, while cloud computing revenue grew 59% year-over-year. Our strong profit growth and cash flow enable us to continue to strengthen our core business and invest for long term growth,” said Maggie Wu, chief financial officer.
CEO’s Take: “We mobilized our entire digital infrastructure to support the economic recovery of businesses across a wide range of sectors, while broadening and diversifying our consumer base by addressing their changing preferences in a post-Covid-19 environment. Despite these unusual times, we remain focused on the long term, on fulfilling our mission, and on creating true value for our consumers and business customers,” Zhang said.